Ever since the introduction of Artificial Intelligence, it has become a hot topic in the industry. The artificial intelligence craze is such that corporations, governments, and militaries want to harness it so that they can obtain an edge over their competition.
However, with time passes, many companies who invested huge sum of resources are seeing less ROI or in some cases negative ROIs. Many people are suggesting that this will lead to another DOTCOM burst
What is Dotcom Burst ?
Before the craze of artificial intelligence, there was a craze for dotcom. during the late 1990s, the internet was booming. Everyone thought that the internet would change the world but one thing they did wrong. They overestimated how long these companies would make profit.
People started to invest heavily. Many companies went to public through IPOs (Initial Public Offerings) raising millions within days. But these companies have no clear plan, no revenue and no working product. This result in overvaluation of the companies. Also, many companies spent heavily on advertising and expansion but they focused less on profitability. It leads to many companies become bankrupt. Also, it results in panic among investors. Flow of the money stops and this causes bubble to burst.
Is Artificial Intelligence Heading Towards Another Dotcom Burst
Market is fearing that the of artificial intelligence may lead to new bubble. For example OpenAI CEO Sam Altman said ” AI market is in a bubble.” A MIT study citied that 95% of coporate generative AI have failed to generate meaningful financial returns. Bank of England has warned that AI related valuations seem “Overstated and there is risk of sharp market corrections.”
But there are also some counter points that indicate AI boom is not a bubble. According to the Forbes article AI has not only been integrated in speculative startups also into many industries. Also, even in the dotcom burst, companies like Amazon, Ebay survived and eventually thrived.
Conclusion
Reason for fear is that many AI firms are valued based on their potential rather from proven profits. Tech giants are spending massively on the artificial intelligence which is more than the actual demand. Many analyst worried that such cost will result in the strain on financials of the company. Studies have shown that 95% of corporate Artificial intelligence projects haven’t generated any real profits yet.
Reason of optimism is that AI ecosystem is being dominated by financially strong companies and not by small startups with no revenue. Today investors are more informed and cautious after the past debacle. Regulations and due diligence has become far stronger than during dotcom boom. Even if the AI startup fails, the core technology will survive and evolve.
Saying AI is a bubble is controversial but people still needs to stay alert and avoid such past disasters repeating.